Are we heading towards a corporate tax system fit for the 21st century?

Devereux, Michael
(2013)
Are we heading towards a corporate tax system fit for the 21st century?
In: ESRC Centre for the Microeconomic Analysis of Public Policy at IFS and CIOT Lecture, 30/10/2013, The Royal Society of Arts, London.
(Unpublished)

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Abstract

According to the OECD, "base erosion constitutes a serious risk to tax revenues, tax sovereignty and tax fairness for OECD members countries and non-members alike a significant cause of base erosion is profit shifting". Although there has been discontent with the existing framework for many years, considerable impetus has been given to the OECD BEPS project by the G8 and the G20. OECD rhetoric includes statements such as "BEPS offers a global roadmap that will allow governments to collect the tax revenue they need to serve their citizens. It also gives businesses the certainty they need to invest and grow", and that this is a "once in a century" opportunity to reform the international tax system. It is clear that the OECD intends to propose evolutionary, rather than revolutionary, reforms. But it is not at all clear that such an approach will generate an international tax system fit for the 21st century. It is not only the practical working of the system that is in doubt, but its conceptual basis. A lack of a good conceptual basis means that reforms may be piecemeal and arbitrary.

This talk addressed fundamental issues of principle and practice in the allocation of profits for taxation. It questioned the conceptual basis of the existing OECD framework, discussed the BEPS action plan, and considered other potential methods of allocating taxing rights between countries, including methods based on residence, destination and formula apportionment. This lecture was organised by the ESRC Centre for the Microeconomic Analysis of Public Policy at IFS and the Chartered Institute of Taxation (CIOT) and was designed to promote serious debate among policy-makers, opinion-formers and the wider tax and economic communities. Stephen Coleclough, CIOT, opened the event. Following the lecture, there was a panel debate with Paul Johnson, IFS (chair), Bill Dodwell, Deloitte, and Nicholas MacPherson, Permanent Secretary, HM Treasury.